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FIRST DIVISION

[G.R. Nos. 119609-10. September 21, 2001.]

PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, OCEANIC


WIRELESS NETWORK, INC., DAVID M. CASTRO, MAXIMO A.
MACEREN, CAESAR PARLADE, MELQUIADES C. GUTIERREZ,
EDUARDO M. VILLANUEVA, and EDILBERTO S. ALEJANDRO ,
petitioners, vs . HONORABLE SANDIGANBAYAN (Third Division), JOSE
L. AFRICA + , MANUEL H. NIETO, JR., ANDRES L. AFRICA, AEROCOM
INVESTORS AND MANAGERS INC., POLYGON INVESTORS AND
MANAGERS, INC., and BELGOR INVESTMENT CORPORATION ,
respondents.

[G.R. Nos. 119623-25. September 21, 2001.]

OCEANIC WIRELESS NETWORK, INC., MELQUIADES C. GUTIERREZ,


MAXIMO A. MACEREN, and CAESAR O. V. PARLADE, petitioners, vs .
HONORABLE SANDIGANBAYAN (Third Division), and JOSE L.
AFRI CA + , MANUEL H. NIETO, JR., ANDRES L. AFRICA, AEROCOM
INVESTORS & MANAGERS, INC., POLYGON INVESTORS &
MANAGERS, INC., SILANGAN INVESTORS & MANAGERS INC., and
BELGOR INVESTMENT CORPORATION, respondents.

The Solicitor General for PCGG.


Arthur D. Lim Law O ce, Juan de Ocampo and Victor A. Africa for private
respondents.

SYNOPSIS

The Presidential Commission on Good Government (PCGG) sequestered the


Class "A" shareholding in Oceanic Wireless Network, Inc. (OWNI) amounting to 63,573
shares out of the total 105,955 outstanding capital stock, or about 60% of the
outstanding capital stock. On August 28, 1990, the (PCGG) sent Corporate Secretary
Victor A. Africa of OWNI, directing him to send notices to all stockholders of record of
OWNI for a special stockholders' meeting to be held on September 17, 1990. During the
special stockholders' meeting, PCGG voted all the Class "A" shares in the election of
directors and elected to the board of directors Commissioners Maximo A. Maceren,
Cesar O. V. Parlade and Melquiades C. Gutierrez representing the Class "A" shares and
Colin Brooker and Terry Miller representing Class "B" and "C" shares. On October 9,
1990, Corporate Secretary Victor A. Africa wrote the Securities Exchange Commission
questioning the election of PCGG nominees as directors of the OWNI board on the
ground that they were not stockholders of OWNI. On January 27, 1991, the special
stockholders' meeting of OWNI took place. An election of directors for Class "A" shares
was held. Manuel H. Nieto, Jr., Jose L. Africa, and Andres L. Africa were elected as
directors for Class "A" shares for 1991 until their successors are elected and quali ed.
Manuel H. Nieto, Jr. wrote Melquiades C. Gutierrez informing him of the new set of
directors and requested for the turnover of the management of OWNI, including all
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corporate records to the new set of directors. PCGG, acting for itself and in behalf of
OWNI, led with the Sandiganbayan a complaint for injunction with damages against
Victor A. Africa, Jose L. Africa, Manuel H. Nieto, Jr. and Juan de Ocampo. PCGG sought
to enjoin the defendants from interfering with the management of OWNI and/or
representing themselves as directors. On August 1, 1991, Jose L. Africa, Manuel H.
Nieto, Jr., Andres L. Africa, Aerocom, Polygon, Belgor, and Silangan, including OWNI
itself, led with the Sandiganbayan a separate petition for certiorari and prohibition,
with prayer for temporary restraining order (TRO) and preliminary injunction, against the
PCGG. By agreement of the parties, the Sandiganbayan jointly heard the two civil cases.
On April 25, 1994, the Sandiganbayan promulgated a decision in favor of the Africa
group and dismissed the PCGG complaint. Petitioners then led with the
Sandiganbayan a motion for reconsideration of the decision. The Sandiganbayan
denied the motion. Hence, this joint petition with prayer for consolidation. The main
issue raised was whether or not the PCGG's takeover of OWNI was legal. SIcTAC

The Supreme Court found the writ of sequestration issued against OWNI not
valid because the suit against Manuel H. Nieto and Jose L. Africa as shareholders in
OWNI was not a suit against OWNI. The Court previously held that failure to implead the
corporations as defendants and merely annexing a list of such corporations to the
complaints was a violation of their right to due process for it would in effect be
disregarding their distinct and separate personality without a hearing. Furthermore, the
PCGG issued the writs of sequestration beyond the period set by the Constitution. The
petitions were denied.

SYLLABUS

1. CONSTITUTIONAL LAW; PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT


(PCGG); SCOPE AND EXTENT OF POWER. — In Bataan Shipyard & Engineering Co., Inc. v.
PCGG, we declared the scope and extent of the powers that the PCGG may exercise with
regard to the property of businesses sequestered: ". . . the PCGG cannot exercise acts of
dominion over property sequestered, frozen or provisionally taken over. As already earlier
stressed with no little insistence, the act of sequestration, freezing or provisional takeover
of property does not import or bring about a divestment of title over said property; does
not make the PCGG the owner thereof. In relation to the property sequestered, frozen or
provisionally taken over, the PCGG is a conservator, not an owner . Therefore, it can not
perform acts of strict ownership; and this is specially true in the situations contemplated
by the sequestration rules where, unlike cases of receivership, for example, no court
exercises effective supervision or can upon due application and hearing, grant authority for
the performance of acts of dominion."
2. ID.; ID.; LIFTING OF THE WRIT OF SEQUESTRATION; EFFECT THEREOF. — The
sequestration orders issued against respondents shall be deemed automatically lifted due
to the failure of PCGG to commence the proper judicial action or to implead the
respondents therein within the period prescribed by Article XVIII, Section 26 of the 1987
Constitution. The lifting of the writs of sequestration will not necessarily be fatal to the
main case since the lifting of the subject orders does not ipso facto mean that the
sequestered property are not ill-gotten. The effect of the lifting of the sequestration
against OWNI will merely be the termination of the role of the government as conservator
thereof. In other words, the PCGG may no longer exercise administrative or housekeeping
powers and its nominees may no longer vote the sequestered shares to enable them to sit
on the corporate board of the subject firm.
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DECISION

PARDO , J : p

What is before the Court is a joint petition 1 to annul and set aside the decision 2 of
the Sandiganbayan dismissing petitioners' complaint for injunction with damages against
Victor A. Africa, Jose L. Africa, + Manuel H. Nieto, Jr. and Juan de Ocampo 3 and the
resolution 4 denying petitioners' motion for reconsideration.
The Facts
On August 28, 1990, the Presidential Commission on Good Government (PCGG)
sent Corporate Secretary Victor A. Africa of Oceanic Wireless Network, Inc. (OWNI), a
letter dated August 3, 1990, directing him to send notices to all stockholders of record of
OWNI for special stockholders' meeting to be held on September 17, 1990. He was
required to issue one qualifying share each to PCGG Commissioners Maximo A. Maceren
and David M. Castro from the unissued shares and to record the transfer in the stock and
transfer book of OWNI. Failure to comply within ve (5) days from receipt thereof,
Assistant Solicitor General Ramon S. Desuasido would be designated as acting corporate
secretary.
On September 17, 1990, during the special stockholders' meeting of OWNI, PCGG
voted all the Class "A" shares in the election of directors and elected to the board of
directors Commissioners Maximo A. Maceren, Cesar O. V. Parlade and Melquiades C.
Gutierrez representing the Class "A" shares and Colin Brooker and Terry Miller representing
Class "B" and "C" shares. The new board of directors then elected Commissioner Maximo
A. Maceren as Chairman of the Board, Melquiades C. Gutierrez as President, Assistant
Solicitor General Ramon S. Desuasido as Acting Corporate Secretary and Almario P.
Velasco as Acting Treasurer. None of the registered Class "A" shareholders of OWNI was
present in that special stockholders meeting.
PCGG sequestered the Class "A" shareholding in OWNI amounting to 63,573 shares
out of the total 105,955 outstanding capital stock, or about 60% of the outstanding capital
stock, and PCGG voted all the Class "A" shares by virtue of the following writs of
sequestration, to wit:
(a) The order of sequestration, dated April 11, 1986, which covers shares of
Jose L. Africa, + Roberto S. Benedicto, + Andres L. Africa and Victor A. Africa in
OWNI. PCGG Commissioner Mary Concepcion Bautista signed the sequestration
order.
(b) The writs of sequestration, dated June 15, 1988, were issued by the
PCGG against Aerocom, Polygon on August 3, 1988 or one day after the
constitutional deadline as provided in Section 26, Article XVIII of the 1987
Constitution. Furthermore, no court case has been led against Aerocom,
Polygon, Belgor Investment Corp., Silangan Investors & Manages, Inc. and OWNI.

On October 9, 1990, Corporate Secretary Victor A. Africa wrote the Securities


Exchange Commission questioning the election of PCGG nominees as directors of the
OWNI board on the ground that they were not stockholders of OWNI.
Upon instruction of the Africa group, Atty. Victor A. Africa sent notices to all
stockholders of OWNI advising them of a special stockholders' meeting of OWNI to be
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held on January 27, 1991, at the Holiday Inn, Manila, for the purpose of the election of
directors and other matters.
On January 27, 1991, the special stockholders' meeting of OWNI took place.
Stockholders owning 63,573 Class "A" shares were represented. Atty. Juan de Ocampo
was designated as acting secretary to record the minutes of the meeting. An election of
directors for Class "A" shares was held. Manuel H. Nieto, Jr., Jose L. Africa + and Andres L.
Africa were elected as directors for Class "A" shares for 1991 until their successors are
elected and quali ed. Class "B" and "C" shareholders did not attend the meeting. No new
directors for them were elected.
The stockholders directed the new o cers to dig deeper to the reported OWNI-
Digitel deal. Atty. Victor A. Africa, as corporate secretary, was directed to furnish all the
banks with said resolution. The board formed an executive committee and appointed
Manuel H. Nieto, Jr. as chairman, Jose L. Africa + as member and the incumbent directors
representing Class "B" and "C" shares.
On July 8, 1991, Manuel H. Nieto, Jr., in his capacity as OWNI president, wrote the
National Telecommunications Commission (NTC), requesting the NTC to hold in abeyance
the application, or if granted, to withdraw and recall OWNI's permit and frequency
allocations as the same were made by an unauthorized board.
On July 10, 1991, Manuel H. Nieto, Jr. wrote Melquiades C. Gutierrez informing him
of the new set of directors and requested for the turnover of the management of OWNI,
including all corporate records to the new set of directors. Atty. Victor A. Africa, in
compliance with the directive of the OWNI board, wrote Traders Royal Bank informing it of
the new bank signatories.
On July 30, 1991, Manuel H. Nieto, Jr. and Jose L. Africa + circularized a letter to the
staff and employees of OWNI informing them of the new set of board of directors.
On July 29, 1991, PCGG, acting for itself and in behalf of OWNI, led with the
Sandiganbayan a complaint for injunction with damages against Victor A. Africa, Jose L.
Africa, + Manuel H. Nieto, Jr. and Juan de Ocampo. 5 PCGG sought to enjoin the defendants
from interfering with PCGG's management of OWNI and/or representing themselves as
directors.
On August 1, 1991, Jose L. Africa, + Manuel H. Nieto, Jr., Andres L. Africa, Aerocom,
Polygon, Belgor, and Silangan, including OWNI itself, led with the Sandiganbayan a
separate petition for certiorari and prohibition, with prayer for temporary restraining order
(TRO) and preliminary injunction, against the PCGG. 6
By agreement of the parties, the Sandiganbayan jointly heard Civil Cases Nos. 0126
and 0127.
On April 25, 1994, the Sandiganbayan promulgated a decision, the dispositive
portion of which reads:
"(1) declaring as null and void the PCGG writs of sequestration, dated June 15,
1988 against Aerocom Investors & Managers Inc., Polygon Investors &
Managers, Inc., Silangan Investors & Managers, Inc. and Belgor
Investments, Inc. for the reason that the said writs of sequestration were
deemed automatically lifted for failure of the PCGG to commence the
necessary judicial action against the said corporations within the required
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six-month period pursuant to Section 26 of Article XVIII of the 1987
Constitution.
"(2) declaring as null and void the order of sequestration, dated April 11, 1986,
relative to the OWNI shares owned by Jose L. Africa and Victor A. Africa on
the ground that the said order of sequestration was signed only by PCGG
Commissioner Mary Concepcion Bautista in violation of Section 3 of the
Rules & Regulations of the PCGG requiring the signatures of at least two
Commissioners on such order of sequestration.
"(3) declaring as null and void the acts and conduct of PCGG, its agents,
nominees and representatives in reorganizing and taking over the Board of
Directors and management of OWNI, including the acts of calling and
holding a special stockholders' meeting of OWNI on September 17, 1990,
the election therein of OWNI chairman and directors, president, acting
secretary and acting treasurer and the appointment of PCGG nominees as
corporate officers of OWNI;
"(4) ordering all the PCGG nominees and representatives in the present Board of
Directors and management of OWNI including but not limited to
respondents Maximo A. Maceren, David M. Castro, Cesar Parlade,
Melquiades C. Gutierrez, Eduardo M. Villanueva and Edilberto S. Alejandro
as well as their replacements, if any, to vacate their positions in OWNI; and
considering the interest of justice, respondents in Civil Case No. 0127 are
hereby ordered to REFRAIN and DESIST;
(a) from further implementing /acting on the basis of the Writs of
Sequestration such as operating, administering and managing the
affairs and business of OWNI, or representing themselves as
directors and officers of OWNI;
(b) from disbursing, utilizing, disposing and committing the funds and
assets of OWNI and/or entering into any transactions for the bene t
of Digitel;
(c) from excluding petitioners Jose L. Africa, Manuel H. Nieto, Jr. and
Andres L. Africa as Chairman of the Board, President and Treasurer,
respectively, of OWNI;

(d) from making any expenditures for the use and bene t of Digitel and
pursuing any and all papers/communications led by OWNI with
the National Telecommunications Commission relative to the
requirements of Digitel to comply with Digitel's franchise;
"(5) ordering the respondents in Civil Case No. 0127 their o cers, agents,
representatives and other persons acting under their orders/instructions:
(a) to vacate OWNI's o ce premises at the Electra House, Esteban St.,
Legaspi Village, Makati; (b) to turn over all the corporate records of OWNI
to petitioner Jose L. Africa, et al.; and (c) render an accounting of all
transactions undertaken by them in the name or in behalf of OWNI,
including disbursement of corporate funds;
"(6) dismissing the complaint as well as the compulsory counterclaims in Civil
Case No. 0126, with costs against the petitioners therein, PCGG."

On May 6, 1994, petitioners led with the Sandiganbayan a motion for


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reconsideration 7 of the decision; however, on March 30, 1995, the Sandiganbayan denied
the motion. 8
Hence, this joint petition with prayer for consolidation. 9
On August 21, 1995, we granted the consolidation. 1 0
Petitioners contend that:
First: the OWNI board was dormant and inactive necessitating the PCGG takeover.
And in reorganizing the OWNI board on September 17, 1990, PCGG merely performed its
duty of preventing further dissipation of the assets of OWNI in light of a 5.7 million peso
payroll anomaly committed by the former Finance Manager of OWNI;
Second: the Sandiganbayan erred in declaring null and void the writs of
sequestration against respondents Polygon Investors and Managers, Inc., Aerocom
Investors and Managers, Inc., and Silangan Investors and Managers, Inc., for failure of the
PCGG to le the required cases against these companies, as said ruling runs counter to
the recent decision of the Supreme Court in the PCGG sequestration cases;
Third: the Sandiganbayan decided on non-issues or issues that were not involved in
the application for injunction, and compounded this mistake when it granted the main
reliefs prayed for in Case No. 0127, although the hearings were only in connection with
prayer for the issuance of a writ of preliminary injunction. EcHaAC

Fourth: the Sandiganbayan erred in ordering the ouster of non-PCGG respondents


from the positions they were holding in OWNI without rst putting in place the safeguards
required by the case of Cojuangco v. Roxas. 1 1
The Issue
The main issue raised is whether or not the PCGG's takeover of OWNI is legal.
The Court's Ruling
The petition must fail.
Petitioner PCGG explained that prior to September 17, 1990, OWNI was a dormant
and inactive corporation. There was no functioning board which made possible the Finance
Manager's embezzlement of company funds. And in the exercise of their powers pursuant
to Executive Order Nos. 1, 2, 14 and 14-A, PCGG sequestered a majority of shares of
stocks of OWNI. PCGG was only consistent with its mission of preventing dissipation of
assets of sequestered corporations or businesses when it took over control of OWNI.
In Presidential Commission on Good Government v. Cojuanco, Jr ., 1 2 the Court ruled
that who should vote the sequestered shares requires the determination of the ill-gotten
character of those shares and consequently the rightful ownership thereof. The issue was
still pending in the main case in the Sandiganbayan. This is only an incident of the main
case and is limited to the stockholders' meeting held on September 17, 1990. This is
without prejudice to the nal disposition of the merits of the main suit. The ownership of
the shares is still under litigation. It is not known whether the shares are part of the ill-
gotten wealth of former President Marcos and his "cronies."
I n Bataan Shipyard & Engineering Co., Inc. v. PCGG , 1 3 we declared the scope and
extent of the powers that the PCGG may exercise with regard to the property of
businesses sequestered:
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". . . the PCGG cannot exercise acts of dominion over property sequestered,
frozen or provisionally taken over. As already earlier stressed with no little
insistence, the act of sequestration, freezing or provisional takeover of property
does not import or bring about a divestment of title over said property; does not
make the PCGG the owner thereof. In relation to the property sequestered, frozen
or provisionally taken over, the PCGG is a conservator, not an owner . Therefore, it
can not perform acts of strict ownership; and this is specially true in the situations
contemplated by the sequestration rules where, unlike cases of receivership, for
example, no court exercises effective supervision or can upon due application and
hearing, grant authority for the performance of acts of dominion."

Petitioners contend that the Sandiganbayan should not have nulli ed the writs of
sequestration because there was no need to le a separate action against OWNI, Polygon,
Aerocom and Silangan since they had been included in the list of the ill-gotten wealth of
defendants Jose L. Africa + and Manuel H. Nieto, Jr. in Civil Case No. 0009. Petitioners
cited Republic v. Sandiganbayan (First Division), 1 4 in which the Court held:
"1) Section 26, Article XVIII of the Constitution does not, by its terms or any
fair interpretation thereof, require that corporations or business enterprises
alleged to be repositories of "ill-gotten wealth," as the term is used in said
provision, be actually and formally impleaded in the actions for the recovery
thereof, in order to maintain in effect existing sequestrations thereof;
"2) complaints for the recovery of ill-gotten wealth which merely identify
and/or allege said corporations or enterprises to be the instruments, repositories
or the fruits of ill-gotten wealth, without more, come within the meaning of the
phrase "corresponding judicial action or proceeding" contemplated by the
constitutional provision referred to; the more so, that normally, said corporations,
as distinguished from their stockholders or members, are not generally suable for
the latter's illegal or criminal actuations in the acquisition of the assets invested
by them in the former;
"3) even assuming the impleading of said corporations to be necessary
and proper so that judgment may comprehensively and effectively be rendered in
the actions, amendment of the complaints to implead them as defendants may,
under existing rules of procedure, be done at any time during the pendency of the
actions thereby initiated, and even during the pendency of an appeal to the
Supreme Court — a procedure that, in any case, is not inconsistent with or
proscribed by the constitutional time limits to the ling of the corresponding
complaints "for" — i.e., with regard or in relation to, in respect of, or in connection
with, or concerning — orders of sequestration, freezing, or provisional takeover."
In this case, the PCGG's complaint 1 5 for "Reconveyance, Reversion, Accounting,
Restitution and Damages" against Jose L. Africa, + Manuel H. Nieto, Jr., the Marcos
Spouses, Ferdinand Marcos, Jr., Roberto S. Benedicto, + Juan Ponce Enrile, Potenciano
Ilusorio + was led on July 22, 1987. In the complaint, Polygon, Silangan, Aerocom and
OWNI were included in the list of property as part of the defendants' ill-gotten wealth.
We nd the writ of sequestration issued against OWNI not valid because the suit in
Civil Case No. 0009 against Manuel H. Nieto and Jose L. Africa + as shareholders in OWNI
is not a suit against OWNI. This Court has held that "failure to implead these corporations
as defendants and merely annexing a list of such corporations to the complaints is a
violation of their right to due process for it would in effect be disregarding their distinct
and separate personality without a hearing.'' 1 6
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Furthermore, PCGG issued the writs of sequestration on August 3, 1988, which was
beyond the period set by the Constitution.
Article XVIII, Section 26, of the 1987 Constitution provides:
"Sec. 26. The authority to issue sequestration or freeze orders under
Proclamation No. 3 dated March 25, 1986 in relation to the recovery of ill-gotten
wealth shall remain operative for not more than eighteen months after the
rati cation of this Constitution. However, in the national interest, as certi ed by
the President, the Congress may extend said period.

"A sequestration or freeze order shall be issued only upon showing of a


prima facie case. The order and the list of the sequestered or frozen properties
shall forthwith be registered with the proper court. For orders issued before the
rati cation of this Constitution, the corresponding judicial action or proceeding
shall be led within six months from its rati cation. For those issued after such
rati cation, the judicial action or proceeding shall be commenced within six
months from the issuance thereof.
"The sequestration or freeze order is deemed automatically lifted if no
judicial action or proceeding is commenced as herein provided."

The sequestration orders issued against respondents shall be deemed


automatically lifted due to the failure of PCGG to commence the proper judicial action or
to implead the respondents therein within the period prescribed by Article XVIII, Section
26 of the 1987 Constitution.
The lifting of the writs of sequestration will not necessarily be fatal to the main case
since the lifting of the subject orders does not ipso facto mean that the sequestered
property are not ill-gotten. The effect of the lifting of the sequestration against OWNI will
merely be the termination of the role of the government as conservator thereof. In other
words, the PCGG may no longer exercise administrative or housekeeping powers 1 7 and
its nominees may no longer vote the sequestered shares to enable them to sit on the
corporate board of the subject firm.
The Fallo
WHEREFORE, the petitions are hereby DENIED. The decision and resolution of the
Sandiganbayan are hereby AFFIRMED.
No costs.
SO ORDERED.
Davide, Jr., C.J., Kapunan and Ynares-Santiago, JJ., concur.
Puno, J., on official leave.

Footnotes
+. Deceased.
+. Deceased.
1. Under Rule 45 of the 1964 Revised Rules of Court.

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2. In Civil Cases Nos. 0126 and 0127, promulgated on April 25, 1994. De Leon, Jr., J., ponente,
Hermosisima and Del Rosario, JJ., concurring. G.R. Nos. 119609-10, Rollo, 44-69.
+. Deceased.
3. Civil Case No. 0126.
4. Promulgated on March 30, 1995, G.R. Nos. 119609- 10, Rollo, pp. 70-85.

+. Deceased.
+. Deceased.
+. Deceased.
+. Deceased.
+. Deceased.

+. Deceased.
5. Civil Case No. 0126.
+. Deceased.
6. Civil Case No. 0127.
7. Rollo, pp. 205-226.

8. Joint Petition, Annex "B", Rollo, pp. 70-85.


9. Filed on May 19, 1995, Joint Petition, Rollo, pp. 8-43. On June 05, 1995, in G.R. No. 119609,
we required the respondents to comment on the petition within ten (10) days from notice
(Rollo, p. 259).

10. G.R. Nos. 119623-24, Rollo, p. 322.


11. 195 SCRA 797 [1991].
12. 361 Phil. 892, 899 [1999].
13. 150 SCRA 181, 236 [1987].
+. Deceased.

14. 310 Phil. 401, 516-517 [1995].


15. Docketed as Case No. 0009.
+. Deceased.
+. Deceased.
+. Deceased.

+. Deceased.
16. PCGG v. Sandiganbayan , 353 Phil. 80, 91-92 [1998], citing Republic v. Sandiganbayan , 325
Phil. 762 [1996].
17. Republic v. Sandiganbayan , 355 Phil. 181, 207 [1998], citing Baseco v. PCGG , supra, Note
12, at pp. 236-239, on the scope of the powers of PCGG over properties sequestered,
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frozen or provisionally taken over.

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